Mumbai, Feb 3 (PTI) Stock market benchmark indices Sensex and Nifty were trading nearly 3 per cent higher during afternoon session on Tuesday after India and the US agreed to a trade deal under which Washington will bring down the reciprocal tariff on Indian goods to 18 per cent.

After starting the trade on a buoyant note, the 30-share BSE Sensex later jumped 4,205.27 points or 5.14 per cent to hit the day's high of 85,871.73. The 50-share NSE Nifty surged 1,252.8 points or 4.99 per cent to 26,341.20.

During the afternoon trade, the BSE benchmark traded 2,411.07 points or 2.95 per cent higher at 84,065.30. The Nifty quoted 742.30 points or 2.96 per cent up at 25,828.35.

India and the US have agreed to a trade deal under which Washington will bring down the reciprocal tariff on Indian goods to 18 per cent from current 25 per cent, US President Donald Trump said on Monday after a phone conversation with Prime Minister Narendra Modi.

All the 30-Sensex firms were trading higher. Adani Ports, Bajaj Finance, Power Grid, Bajaj Finserv, Eternal and InterGlobe Aviation were trading sharply higher in the range of 8-4 per cent.

The dramatic announcement of the long-awaited US-India trade deal and the US decision to cut tariffs on India to 18 per cent is a game changer for the Indian economy and stock markets, VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

"The combination of the US-India trade deal, the EU-India trade deal and the growth-oriented Budget will boost the market sentiments and the animal spirits in the economy. The stock market, anticipating and discounting these developments will boom," he added.

The development also propelled a sharp rally in textile, leather, gems and jewellery, seafood exports and specialty chemicals stocks.

In Asian markets, South Korea's Kospi rebounded and jumped over 6 per cent. Japan's Nikkei 225 index, Shanghai's SSE Composite index and Hong Kong's Hang Seng index were also trading higher.

US markets ended higher on Monday.

"The newly announced India–US trade agreement is a constructive development for India’s capital markets, overall trade, and long-term economic prospects. By reducing the effective US tariff on Indian goods to 18 per cent, this deal restores predictability for Indian exporters..." "The clearer, lower tariff regime enhances competitiveness for India's export-oriented sectors - such as textiles, engineering goods, chemicals, and auto components - making Indian products more price-competitive in the US market and supporting export growth," Mahavir Lunawat, CMD, Pantomath Capital, said.

Foreign institutional investors offloaded equities worth Rs 1,832.46 crore on Monday, while Domestic Institutional Investors (DIIs) bought stocks worth Rs 2,446.33 crore, according to exchange data.

Brent crude, the global oil benchmark, dipped 0.44 per cent to USD 65.99 per barrel.

On Monday, the Sensex jumped 943.52 points or 1.17 per cent to settle at 81,666.46. The Nifty climbed 262.95 points or 1.06 per cent to end at 25,088.40. PTI SUM SUM DR DR

India-US trade deal cuts US tariff to 18%, sparking major stock market rally and gains for export sectors. The United States agreed to reduce the reciprocal tariff on Indian goods from 25% to 18%, prompting equity benchmarks to rally-Sensex and Nifty rose nearly 3% in afternoon trade-with export oriented sectors such as textiles, leather, gems and jewellery, seafood and specialty chemicals leading gains and market participants citing restored tariff predictability and improved export competitiveness.